The Weekly Sage hopes to regularly bring brief profiles of key contributors to thought and faith before a Christian audience for historical education and awareness of valuable resources.

Irving Fisher

• “We have seen that all wealth and property imply prospective services or ‘desirable events.’ It is the desirability of these future expected services which gives meaning to all economic phenomena. It would therefore be impossible, in any full view of the subject, to confine ourselves strictly to the study of objective wealth, property, and services….Wealth is wealth only because of its services; and services are services only because of their desirability in the mind of man, and of the satisfactions which man expects them to render. Indeed, the desirability of services is implied in their very definition as ‘desirable events.’ The mind of man supplies the mainspring in the whole economic machinery. It is in his mind that desires originate, and in his mind that the train of events which he sets going in nature comes to an end in the experience of subjective satisfactions. It is only in the interim between the initial desire and the final satisfaction that wealth and its services have place as intermediaries.”[1]
• “Failures are sometimes due to a false fear of calamity, a shock to business confidence. This will cause a shrinkage of values in several ways. For instance, it will induce creditors to demand payment and refuse renewals of bills. Forced liquidation and contraction of credit are the result. No physical capital is destroyed, but the form of ownership is violently disturbed, and often the management, being transferred from stockholders to bondholders, is turned from competent to incompetent hands. Above all, the expectations of the future are changed and confused. Plans are given up, orders are countermanded, and trade is stopped. Assets, representing as they do the value of future expectations, suffer sudden and heavy reductions.”[2]

Irving Fisher (1867 – 1947) was one of the leading American economists of the late 19^th and early 20^th centuries, a period that saw the profession of economics in the United States rise to the level of global impact it has maintained ever since. Fisher, as an original scholar, familiar with the literature of the field across the world, created and integrated concepts prolifically and excellently as an author. In so doing, he led and inspired a new generation of American thinkers including Frank Knight, James Tobin, and Jacob Viner.

Irving Fisher was born in New York and was raised by a Congregationalist minister as a part of the eastern educational and cultural elite. As the post-Civil War era saw vast expansion and economic growth westward, the Atlantic coast saw the development of excellent national institutions, such as Yale College, where Fisher was admitted, achieving the first PhD in Economics granted there. Fisher continued his studies overseas, as was natural in that time for promising American academics.

After his return to the United States, Fisher began teaching at Yale in 1890 at the age of 33, and would remain there throughout his career, taking up the title of professor emeritus 45 years later in 1935. From 1896 to 1910 he edited the Yale Review, and achieved the presidency of the American Economic Association in 1918. He also co-founded the Econometric Society in 1930, and served as that organization’s first president.

Moreover, Fisher was very active beyond the economic field. His fertile mind ranged from social issues such as vegetarianism and prohibition to practical inventions for filing information. This latter work brought him a significant amount of money, and Fisher’s very successful stock investments in the early 20^th century brought him even more prominence and respect as an economic thinker. Despite his Christian upbringing, like many of the intellectuals of his day, Fisher embraced atheism as a matter of personal belief, leading him to embrace a popular Social Darwinism and the corresponding cause of eugenics.

Nevertheless, Fisher’s wide-ranging interests did not prevent or distract him from developing significant and influential work in economics. His books, including prominent works such as The Nature of Capital and Income (1906), The Rate of Interest (1907), The Money Illusion (1928), and Booms and Depressions (1932), as well as the more basic textbook Elementary Principles of Economics (1911).

In these writings, Fisher pioneered an increased use of mathematics, utilizing equations, graphs, and data with greater frequency and reliance than his contemporaries. However, his incorporation of real world situations, business applications, and practical scenarios makes his works remarkably readable and easy to understand. While his mind was uniquely able to understand the theoretical and algebraic, this never drew him too far away from the day-to-day, on the ground realities of economics. Fisher’s excellent understandings of the importance of time, risk management, future expectations, and money are indicative of this tight grasp of the human and concrete elements of the market.

Along these lines, Fisher developed lasting contributions and advances in the economic field. The Fisher equation, PV = MT, a founding element of the quantity theory of money, was developed by him, relating together the concepts of price level, velocity of money, stock of money, and amount of transactions. Additionally, he honed the impact of time on capital valuation and interest rates and pioneered the use of index numbers. His work on the nature of money and its impact on the economy was respected by economists from Ludwig von Mises to Gary Becker.

Fisher’s written tone was also distinctively excellent among the economists I have profiled here on the Weekly Sage. His scientific procedure modelled a patience and deliberateness that provide strong confidence in his audience. Definitions were produced with logic and care throughout his works. His logical focus led to consistent criticisms of double-counting, inconsistency, and impracticability of economic terms and frameworks. Fisher not only wanted to ensure the accuracy of his work, but also its relevance and usefulness for the man on the street.

Nevertheless, despite his brilliance, Fisher made some significantly inaccurate predictions regarding the Great Depression, foreseeing instead a consistently high-level of economic performance in the United State just before and during the crash. Moreover, this led to personal as well as professional disaster, with Fisher losing large sums on the stock market. As a result, his subsequent works on depressions, despite their solid analysis of risky credit extensions, failures of business confidence, faulty over-production theories, and stabilization policy were generally ignored in favour of the work of John Maynard Keynes.

Nevertheless, as with much of Fisher’s writings, the lasting relevance of these works is evident to anyone who reads them in light of the 2008 Great Recession. I was surprised by how much of Fisher’s early 20^th century work had already appeared in my undergraduate economic studies. However, I was unfortunately not shocked to read that he could not maintain his faith in the light of the significant scientific accomplishments he achieved with his God-given gifts. While the modern record of human sages is replete with example of remarkable work, equal measures of piety are more rarely reconciled with such genius.

• “Think of the disturbance of loan contracts. When, for instance, there is inflation, and the price level rises, the creditors lose and the debtors gain. It might seem at first that this is as broad as it is long since the debtor gains exactly as much as the creditor loses. It might be argued that no harm can be done to society as a whole either by inflation or deflation since the average wealth would not be changed. But one might as well reason that when a bank vault is robbed or when your house is burglarized, society is none the poorer. If you, the victim of the robbery, should be told, ‘What you have lost the burglar has gained, and therefore society as a whole is just as well off!’ that would be cold comfort to you. In somewhat the same sense this burglarizing dollar is defrauding people, even if it does so impersonally. Something is taken away from its rightful owner. The evil is not (primarily at least) general impoverishment; it is social injustice. Unlike burglary or personal fraud, there is no violation of the letter of the law as to debts, but there is a defeat of its spirit and intent.”[3]
• “I am open to conviction, if and when evidence shall be presented of self-starting and self-perpetuating economic rhythms, but thus far I have been able to see only a tangle of coincidence and contradiction, which may be illustrated by a rocking chair, or a seacraft, in surroundings which furnish both rhythmic and erratic influences. The chair, when tipped, certainly has a tendency to keep rocking, but not forever. And perhaps it is either restarted or put out of rhythm by a new jolt from the dusting housewife. The seacraft, when tipped by a wave, tends to return upon itself and to rock on regularly; but its rhythm is constantly put out by the buffeting of additional waves. The waves themselves act under laws of rhythm which are unfailing; yet the actual rhythm will fail, through the buffeting of cross winds. Imagine, then, a rocking chair on the deck of a rocking ship, on a rolling sea. The ultimate chair is subjected to so many influences that its motion will not conform with any simple rhythm. The net motion will be made up of many rhythms and non-rhythms, and will, therefore, appear sometimes rhythmic and sometimes completely unrhythmic. At all events, no one would think of referring to it as ‘the rocking chair cycle.’”[4]

[1] Irving Fisher, The Nature of Capital and Income, (New York: The Macmillan Company, 1906), 41.

[2] Ibid, 88 – 89.

[3] Irving Fisher, The Money Illusion, (New York: Adelphi Company, 1928), 60-61.

[4] Irving Fisher, Booms and Depressions: Some First Principles, (London: George Allen & Unwin, 1933), 57.